Ruckus: FCC Spectrum Move to Boost WiFi Offload, Says Macquarie

By Tiernan Ray

Macquarie Capital USA's Rajesh Ghai today reiterates an Outperform rating on shares of WiFi equipment vendor Ruckus Wireless (RKUS), and a $17 price target, writing that the firm will be helped by a Federal Communications Decision today that will boost use of Ruckus's equipment in metropolitan wireless networks.

Ruckus sells WiFi equipment to carriers that they can use to add capacity without spending on spectrum and cellular towers. This is called “WiFi Offload.”

Writes Ghai, the FCC has added capacity to the part of the electromagnetic spectrum used for WiFI:

This morning the FCC voted unanimously to add an incremental 100 MHz spectrum to the 5GHz band. Previously this piece of the spectrum was being used exclusively for Satellite telephony. The addition of the incremental spectrum will enable wider Wi-Fi channels and hence enable higher speeds with the 802.11ac standard (which runs exclusively on the 5GHz spectrum) and also ease congestion in the spectrum, especially in dense urban areas of the country.

We see this as a strong positive for the Service Provider Wi-Fi market in the US and within our coverage universe Ruckus Wireless in particular, given it makes Wi-Fi offload more practical and compelling to tier-1 carriers, especially in dense congested parts of the country. We are encouraged that the FCC views this move as an enabler of innovation, given the faster speeds and lower congestion that the move will drive. We believe it also alleviates a key concern for all carriers in the US as they struggle to use their respective license spectrums to address the growing data needs of their customers. As we have noted in our initiation, US carriers are likely to reach over 95% of their respective data capacity utilizations by the end of 2015 without the addition of incremental spectrum or a move to LTE-advanced.

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.